UPDATE: This articles includes comments from JPMorgan Chase and details on how BNPL services will be offered to customers.
JPMorgan Payments is adding Affirm to its merchant network, the second buy now/pay later lender the bank has added in as many months.
Merchants using JPMorgan Payment's Commerce Platform will be able to offer Affirm's suite of BNPL loans – including biweekly and monthly installment plans – to customers at checkout. JPMorgan began offering
The move comes as Affirm and Klarna battle for market share in the U.S. ahead of Klarna's hotly anticipated
"Integrations like this significantly expand the reach of Affirm, giving more businesses the tools to thrive in today's retail landscape while delivering maximum flexibility and transparency to more consumers." said Wayne Pommen, Chief Revenue Officer at Affirm, in a statement.
The JPMorgan partnership helps level the playing field between Klarna and Affirm, Aaron McPherson, principal at AFM Consulting, told American Banker.
"The two companies are really competing fiercely in the U.S. market for partnerships with acquirers like JPMorgan Payments," he said. "This represents the mainstreaming of BNPL as a payment option at checkout."
Competition aside, partnering with JPMorgan Payments represents a windfall for both companies due to the "huge scale" the partnership offers, Don Apgar, director, Merchant Payments at Javelin Strategy & Research, told American Banker. JPMorgan Payments is one of the world's largest merchant acquirers and processed $2 trillion in merchant payments in 2024.
"A reseller deal offers huge scale for both Klarna and Affirm by giving them reach into JPM's huge merchant base without the need to sign and service every merchant individually," Apgar said. "Even with a revenue share to JPM, the efficiencies of this kind of relationship make these deals very lucrative for both BNPL companies."
For JPMorgan, offering BNPL to its merchant clients represents a competitive advantage for the bank's merchant acquiring business in addition to a revenue opportunity, Apgar said.
Affirm's challenge will be differentiating itself from Klarna's offering if both options are available at the same time, AFM's McPherson said.
"Will it be rewards or some other kind of incentive to keep coming back? Will it be a case of merchant steering to one or the other, based perhaps on a volume agreement or other incentives?" he said. "Probably it will take the form of a lower rate for the merchant if they steer a certain amount of volume to the BNPL provider. That's the sort of thing Visa and Mastercard do to compete, and I think there are a lot of similarities here.
"A consumer-focused rewards program is possible, but is much more complicated to set up, so I consider it less likely," McPherson said.
Both Affirm and Klarna's offerings will be displayed at checkout if the merchant chooses to offer both.
"BNPLs have unique offerings and strong brand loyalty so it's important to ensure our merchants have choices and we can meet them where they are. At the end of the day, it's about being there for our merchants so they can be there for their customers," Kate Walton, chief commercial officer, Merchant Services at J.P. Morgan Payments, told American Banker.
While Affirm and Klarna compete in the same market, they have differing business models that set them apart, according to a William Blair research note released this morning ahead of the Affirm-JPMorgan partnership.
Merchants may find Affirm's offering more attractive because its wide range of BNPL products are dominated by interest-bearing loans, which are inherently merchant friendly because they shift costs to consumers, Research Analyst Andrew W. Jeffery said in a research note. By comparison, Klarna generated 17% of 2024 revenue and 135% of adjusted operating income from consumer-paid fees. Affirm generates no revenue or AOI from fees, the research note said.
"The pending Klarna (private) IPO has, ironically, heightened investor BNPL unease given what we consider unfavorable company comparisons with Affirm and other industry participants, " Jeffery said. "We are struck by some BNPL participants' desire to optimize economics for either the merchant or the consumer, but we see Affirm as the only company balancing these often-conflicting demands."
